JOINT FAMILY OF UDAYAN CHINUBHAI ETC. vs. COMMISSIONER OF INCOME-TAX, GUJARAT

CIVIL APPEAL No. 946/1965Supreme Court[1967] 1 S.C.R. 91314 October 1966Bench: 3 JudgesAuthor: J.C. SHAH, V. RAMASWAMI, VISHISHTHA BHARGAVA8 pages
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What were the facts?

The assessee, a Hindu undivided family (HUF) comprising C, his wife, and three sons, was initially assessed as an HUF. In 1948, C filed a suit for partition, and in 1950, a consent decree declared the HUF dissolved from October 15, 1947, with each member entitled to a fifth share. C took his share separately, while the remaining properties were held by his wife and three sons as tenants-in-common. In December 1952, C applied for recording the partition under Section 25A of the Income-tax Act, 1922, which the Income-tax Officer (ITO) granted in January 1953, assessing members separately. Subsequently, the ITO issued notices under Section 34 for assessment years 1951-52, 1952-53, and 1953-54 to assess the HUF of the wife and sons, alleging escaped income. The assessees' contention that they were no longer an HUF after the Section 25A order was rejected by the ITO but upheld by the Appellate Assistant Commissioner. The Appellate Tribunal restored the ITO's order, and the High Court ruled in favour of the Revenue. The assessee appealed to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court held that the Income-tax Officer has jurisdiction under Section 25A(1) to record a partition of joint family property even if it is between 'groups of members', and a complete partition among all members is not a prerequisite. The Court found that the conditions for passing an order under Section 25A(1) were satisfied in this case, as C had taken his share, and the remaining members constituted a group between whom a partition in definite portions had occurred. The Court further held that once an order under Section 25A(1) is passed, the HUF ceases to exist for assessment purposes. Section 25A(3) does not apply after an order under Section 25A(1) has been recorded. The Court ruled that Section 34 of the Act does not confer a general power to review or set aside an order passed under Section 25A(1), which is effective for all subsequent years. The proper course for the ITO to challenge such an order would be to move the Commissioner under Section 33B. Therefore, the Revenue could not reassess the assessees as an HUF for the years in question by disregarding the Section 25A(1) order. The appeals were allowed.

What were the issues?

1. Whether the Income-tax Officer has jurisdiction under Section 25A(1) of the Indian Income-tax Act, 1922, to record a partition of joint family property even if the partition is not among all members but between 'groups of members'. (Question of law) 2. Whether, after an order recording partition under Section 25A(1) has been passed, the Revenue can reassess the erstwhile HUF for subsequent assessment years under Section 34 by disregarding the earlier partition order. Assessee's contentions: - The HUF had been dissolved and partitioned as per the High Court decree and the subsequent order under Section 25A(1). - Once an order under Section 25A(1) is passed, the family ceases to exist as an HUF, and subsequent assessments cannot treat it as such. - Section 34 does not grant a general power to review or set aside an order passed under Section 25A(1). Revenue's contentions: - The High Court's decision in favour of the Revenue was based on the principle that each assessment year is a self-contained unit, allowing the ITO to arrive at an independent conclusion contrary to a previous year's assessment if circumstances warrant. - The Revenue argued that it was open to the ITO to ignore the Section 25A(1) order in subsequent assessment proceedings and hold that no severance had occurred, assessing them as an HUF.

Which sections of the Income-tax Act were involved?

Section 25A,Section 34,Section 23,Section 33B

AI-generated summary — verify with the full judgment below

• 913 A JOINT FAMILY OF UDAYAN CHINUBHAI ETC. B c D E F G H v. COMMISSIONER OF INCOME-TAX, GUJARAT October, 14 1966 [J.C. SHAH, V. RAMASWAMI AND V. BHARGAVA, JJ.)

Indian Income-tax Act (11of1922), s. 25A ands. 34- Order record· ing partition of Hindu undivided family-Power to reassess family as a unlt thereafter-Wh•ther exlsls. C. his wife, and his three sons were originally assessed to income-tax in the status of a Hindu undivided family. C filed a suit in 1948 iu the High Court of Bombay for partition and separate possession of his share in the joint family estate. In 1950 the High Court passed a decree. by consent declarine that as from October 15, 1947 the joint family stood dissolved, that all the members of the family had become separate in food, worship and estate from th"at date, and that each member of the family was entitled to a fifth share in the properties movable and im- movable belonging to the family subject to the right of maintenance in favour of C's mother.

Pursuant to the decree C took his share in the properties allotted to him, separately. The other properties remained undivided between C's wife and his three sons each holding a

The order continues below.

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